The Rupp Report: Bad News Is Fast News

Jürg Rupp, Executive Editor

Some 25 years ago, Japan revolutionized every manufacturing process around the world: By
implementing its Total Quality Management (TQM) system, the world was not the same any longer.
Thousands of managers worldwide made a pilgrimage to Japan to learn about the future of production.
The ultimate goal was to handle the whole production process and quality control in-house. To have
a 100-percent vertical range of manufacturing was essential. Trial and error didn't exist anymore.
Just-in-time is common sense today, as are lean production and zero defect.

Top LeagueJapanese products soared, climbing to the top in virtually every corner of industry. The late
Akio Morita, probably one of the last true entrepreneurs and founder of Sony, started a revolution
in consumer electronics with Sony's Walkman. The list of successes is endless. Top labels appeared
on the markets, and Japanese products with famous brands were everywhere. But the fame didn't stop
at the doors of the electronics industry, as Japanese automobile manufacturers became the arch
enemies of the whole Western automotive industry. Everybody knows the story: Toyota left the U.S.
auto manufacturers behind and became the biggest automobile producer in the world, with an
outstanding image of quality. With TQM, everything was under control. After some 25 years of hard
work, Toyota had become a global trademark for reliable and innovative auto manufacturing.

First CloudsBut, with the first financial crisis at the end of the last century, the system started to
erode, and TQM was not good enough anymore. Every industry, including the auto makers, was in
search of cheaper raw materials, and another word became popular with management: sourcing. The
conclusion of the new treaty of the World Trade Organization opened new doors, and the fight for
competitive prices became even tougher. Still, Japanese auto sales -- including Toyota -- soared,
and new models appeared on the market in spite of the colossal problems of the U.S. auto makers --
such as General Motors, Ford and Chrysler.

The Financial Bubble BurstsRaw material became part of the gamble on Wall Street and in other stock markets. Then the
bubble exploded, the world financial system collapsed, and the rest is a sad history. Billions and
billions of U.S. dollars were pumped into various industry sectors to help them survive, mostly
banks and insurance companies, but also the automotive industry. A number of bizarre support
programs were implemented by some governments to save their local auto industries, not taking into
consideration that the problem was just being postponed for another year. Still, the Japanese auto
industry was alive and in better shape than others.

The Broken ImageAnd then came the shock of a few weeks ago: In spite of TQM, Toyota published a recall for
eight models, some 2.5 million autos in the United States and some 1.8 million in Europe. The
reason was a faulty accelerator pedal from a supplier. Why this? The reason seems to be very
simple: The Japanese auto manufacturers also were forced to source cheaper components for their
cars to remain competitive. In the meantime, the story goes on and on: Toyota auto sales have
dropped dramatically, the confidence is gone, and the image is totally broken. Thirty or more years
of hard work have gone down the drain in a few weeks. On top of that, Toyota shares dropped some 20
percent, and -- one might guess -- only because Toyota took the risk to buy cheaper components.

Stay CoolSince 2008, it has become common sense to save money, wherever possible. But, is it
worthwhile to ruin one's own image by saving a few cents? There is a saying in Switzerland: "Some
people are spending one dollar to save 50 cents." I hope this is not the case for your company.
Stay cool, and while creating budgets, don't forget about that saying, your customer and his needs.
Some time ago, TextileWorld.com posted a Rupp Report that discussed the importance of product
quality for remaining competitive in the marketplace
(See "
The
Rupp Report: Can You Afford To Buy Copies?" August 19, 2008). Did you do your homework so
that this will not happen to your company?
TW invites you to share your thoughts with its readers. Write to
jrupp@TextileWorld.com.